Lawmakers Approve $1 Per Pack Cigarette Tax Hike

SPRINGFIELD, Ill. (CBS) — Illinois lawmakers have approved a $1 per pack cigarette tax increase to help fill a gaping Medicaid budget hole, and the governor has indicated he’ll sign it quickly when it reaches his desk.

The Illinois Senate voted 31-27 in favor of the plan on Tuesday, largely along party lines.

The tax increase will apply to cigarettes and a few other smoking devices, but not chewing tobacco or “moist snuff.”

It’s expected to bring in $350 million for the state’s Medicaid system, funding which the feds will match dollar-for-dollar.

The measure also changes hospital assessments statewide, which will bring in $50 million dollars, which the feds would also match.

The total of $800 million in new funding, combined with $1.6 billion in cuts lawmakers approved last week, bring the total Medicaid savings to $2.4 billion.

To get to the target of $2.7 billion in new revenue and/or spending cuts on Medicaid, the remaining balance will be filled through $150 million in unexpected general revenue. That money, as it’s being used to pay old Medicaid bills, will be matched by the feds – bringing the total to $300 million.

Gov. Pat Quinn late Tuesday applauded both chambers through a written statement.

“We need to take decisive action to protect Illinois’ Medicaid system from collapse,” said Quinn. “The cigarette tax is not just good fiscal policy, but good health policy. Adding a dollar per pack will help 60,000 people quit smoking, prevent 60,000 deaths from smoking-related conditions and keep 80,000 kids from taking up smoking in the first place.”

The plan does not just hike taxes on cigarettes – but on other tobacco products as well, like pipe tobacco and cigars.

One Chicago tobacconist said he’s afraid it will drive a lot of business away.

Chuck Levi, owner of Iwan Ries and Company – a tobacconist on Wabash Avenue – said he’s afraid that, because of the higher tax, he would lose some business to online sales.

“It will certainly affect us to the point where we’ll have to probably lay off some employees. Either that or cut our prices, which will cut our margins, obviously – and affect us a lot,” he said.

Levi noted the higher state tax would come on top of a new Cook County tax on pipe tobacco and cigars.

Meantime, he state also is looking to give hospitals a break on their property taxes through a separate bill, with tax breaks coming to those who provide a certain amount of charity care to the poor.

Proponents of that bill, which also passed the Senate on Thursday, said tax breaks will still be provided, but hospitals will “have to earn them” by proving they provide a certain level of care. Some see this as an appeasement due to hospitals’ increased costs from the assessment changes.